Question
Lester, Torres, and Hearst are members of Arcadia Sales, LLC, sharing income and losses in the ratio of 2:2:1, respectively. The members decide to liquidate
Lester, Torres, and Hearst are members of Arcadia Sales, LLC, sharing income and losses in the ratio of 2:2:1, respectively. The members decide to liquidate the limited liability company. The members' equity prior to liquidation and asset realization on August 1 are as follows:
Lester | $18,600 |
Torres | 43,100 |
Hearst | 26,800 |
Total | $88,500 |
In winding up operations during the month of August, noncash assets with a book value of $116,500 are sold for $144,500, and liabilities of $38,800 are satisfied. Prior to realization, Arcadia Sales has a cash balance of $10,800.
a. Prepare a statement of LLC liquidation. Enter any subtractions (balance deficiencies, payments, cash distributions, divisions of loss, sale of assets) as negative numbers using a minus sign. If an amount is zero, enter "0".
Arcadia Sales, LLC | ||||||
Statement of LLC Liquidation | ||||||
For the Period August 1-31 | ||||||
Cash + | Noncash Assets = | Liabilities + | Member Equity Lester (2/5) + | Member Equity Torres (2/5) + | Member Equity Hearst (1/5) | |
Balances before realization | $ | $ | $ | $ | $ | $ |
Sale of assets and division of gain | + | + | + | + | ||
Balances after realization | $ | $ | $ | $ | $ | $ |
Payment of liabilities | ||||||
Balances after payment of liabilities | $ | $ | $ | $ | $ | $ |
Distribution of cash to members | ||||||
Final balances | $ | $ | $ | $ | $ | $ |
b. Provide the journal entry for the final cash distribution to members. For a compound transaction, if an amount box does not require an entry, leave it blank.
c. What is the role of the income- and loss-sharing ratio in liquidating a LLC?
The income- and loss-sharing ratio is only used to on the realization of asset sales. It used for the final distribution.
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